Value-Based Insurance Design Might Help Medicare Cut Costs

Take a patient who has diabetes. If a health plan implements a value-based insurance design (VBID), the employer’s health plan will cover certain diabetes drugs for a reduced copayment. As a result of that reduced copayment, the patient continues to to use his diabetes drug, and therefore the condition is managed better. The employer and health plan see lower overall health care costs because of reduced complications.

Avalere Health, a consulting company, taking a page from the private insurer playbook, says that Medicare could immediately modernize its benefit structure by incorporating VBID because VBID tailors cost-sharing so that the beneficiary pays less for a needed medication or therapy, making him more likely to use it. The employer and health plan benefit because the patient has fewer costly complications.

The report, Value-Based Insurance Design in the Medicare Prescription Drug Benefit: An Analysis of Policy Options, points out that Medicare Part D, with its 26 million enrollees, is a prime target for this type of quality-focused effort. As many as 23 percent of Medicare beneficiaries with five or more chronic conditions account for 68 percent of the program’s spending.

“VBID has the potential to help transform Medicare into a more prudent purchaser of health care that meets patient needs,” says Tanisha Carino, PhD, a vice president at Avalere Health and coauthor of the paper.